Zurich Says First Quarter Net Income Rose 76%

NU Online News Service, May 6, 2:35 p.m. EDT

Zurich Financial Services Group reported first-quarter net income rose 76 percent despite challenges from catastrophe losses and a decline in demand for insurance products due to the economic downturn.

Chief Executive Officer Martin Senn, in a recorded message on the Zurich, Switzerland-based insurance company's website, called the operating results "strong" and said they "demonstrate the continued strengths of our operating platforms and overall business strategy."

"The group has continued to perform well," he said. "This is true despite top line pressures from the competitive markets... and the reduction in demand caused by the current economic environment."

He attributed the company's results to strict underwriting standards and geographic diversification, despite exceptional first quarter catastrophe losses.

The company reported net income compared to last year's first quarter rose by $403 million to $935 million. Group revenues increased 6 percent, or $1.06 billion, to $19.4 billion.

Among its operating segments, general insurance business operating profit dropped 30 percent, or $268 million, to $621. This translated into a 3.3 point increase in the combined ratio to 99.

The carrier said the results were affected by the earthquake in Chili, higher weather-related losses and reduced investment income driven by lower yields for reinvested premiums.

Besides storm losses in the United States and Europe, Zurich said there was high incidence of hail and storm damage in Australia.

The company said "rate changes continued to be positive" and targeted to maintain margins. Zurich added that its continued underwriting discipline is a factor in constraining growth in the current marketplace.

Farmers Insurance, which the company manages, but does not own, saw its business operating profit increase 43 percent, or $138 million in the quarter, to $462 million. Fees and other related revenue rose 13 percent, or $80 million, to $703 million.

Contributing to the results was the integration of 21^st Century Insurance Company into Farmers, which the company said is proceeding "successfully and on schedule."

Life business operating profit rose 58 percent, or $129 million, to $351 million in the quarter.

"Despite feeling the effects of the challenging economic environment in our top line general insurance results, we have continued to achieve a strong operating performance," said Mr. Senn.

He added that the company continues "to combine sustained profitability in our core business segments with strong growth in our global life and Farmers segments. These results underscore our focus on profit margin, operating efficiency and robust risk management."